Thursday, December 06, 2007

How sprawl toasted your pension.

December 5, 2007
Puffs of Financial Smoke
The Credit Bomb Detonates in Florida

...Most mainstream economists are of the view that if we are not already in a recession, we are headed there. But this recession won't be tamed by a simple easing of interest rates by the Federal Reserve.

If the credit crisis is due to financial models that badly missed the proper assessment of risk to financial derivatives, there is no solution until the nation gets a grip on controlling the forces that drove the model in the first place: the economics of suburban sprawl and the fiscal policies that promote it...

...The front page of the Miami Herald covered the story: "The financial problems that provoked hundreds of local governments to pull billions out of a state-run investment fund over the past two weeks prompted the resignation Tuesday of the agency head responsible for investing the money." That would be Jeb Bush loyalist, Coleman Stepanovich.

Yesterday, the Wall Street Journal featured the story, too, reporting on Jefferson County that found itself unable to pay teachers' salaries because the money had disappeared and had to take out an emergency line of credit.

What is going on?...

...The entire financial scheme that ungirds sprawl-financial derivatives based on pools of mortgages-is unraveling...


Teacher's salaries are just the tip of the iceburg, needless to say. They're just one of many investment-dependent payouts that are going to fall very, very short in the near and long term. That includes your pension and everybody else's, too. The same flaky investments that used to pay Florida's teachers also is supposedly going to pay for your retirement, class, not to mention your homeowner's and auto insurance. How many local governments have these flaky investments and intended to use them to fund schools, parks, or programs for the poor and disabled, and seniors? Countless municipalities across the country. Countless pension and 401k investments.

These investments will never recover their "value," because in reality, they have no value. They're pieces of paper invested in other pieces of paper which are, in turn, invested in still more pieces of paper - none of which have any real value. They're worthless. Nobody will buy them, nobody can sell them - they're junk.

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